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SOE executives to get shareholding soon
www.chinanews.cn 2005-08-20 14:33:15
(Source: xinhua)
Aug. 20 - Executives of China's state-owned enterprises, who have been
earning salaries for their work, is expected to become shareholders of
their own enterprises.
China will speed up the move to design and issue long and middle-term
encouragement policies for executives of central state-owned enterprises,
which should be substantial, effective market measures such as shares or
options, said Li Rongrong, director of State-owned Assets Supervision and
Administration Commission (SASAC) under the State Council, on Friday.
This is the first time for China to raise such a suggestion at the
government level to offer shareholdings for managers of 169 central
state-owned enterprises as encouragement.
Offering shareholdings for managers will be first practiced in
enterprises listed overseas, then in those listed at home and finally in
other central state-owned enterprises, an official withthe SASAC told
Xinhua.
Enterprises first chosen should be those of standard corporate governance
and proper management, he said.
According to the official, the revision of the Corporate Law and the
issuance of the notice regulating management buyouts by SASAC constitutes
a legal premise for the establishment of a shareholding encouragement
system.
The SASAC, along with the Ministry of Finance, jointly issued the
provisional regulation in April this year prohibiting management buyouts
of state assets of large state-owned businesses, but allows such
transactions at small- and medium-sizeones.
The regulation was issued when the reform of changing the split-share
structure in China's capital market has started, the official
acknowledged.
There has been existing a large volume of non-tradable state and
corporate shares in China's capital market. Before the reform was
launched this May, only about one-third of the shares in domestically
listed companies are floated on the market, which hasbeen blamed as one
of the major causes of China's sluggish stock markets and putting public
investors at a worse position than the actual controllers of the listed
companies.
Taking shareholding offer as an encouragement refers to permitting
managers to hold certain percentage of increased sharesof the
enterprises, including those from IPO or refinancing, he said.
"In fact, some enterprises listed overseas have begun such practice. What
we are lacking now is just particular measures," said the official.
However, he added, despite such an encouragement itself being beyond
dispute, the biggest obstacle is China's current environment, such as a
share market incapable of objectively reflecting investment value of
companies.
As for the percentage of shareholding, the official said that different
percentage will be implemented in different companies, but there will be
no an upper limit.
Pay for managers of China's state-owned enterprises has been short of a
reasonable standard as some executives managing an enterprises of dozens
of billion-dollar capital earns only hundreds of thousands of dollars a
year no matter whether the enterprise's profits are good or not.
In 2003 and 2004, the SASAC has issued provisional regulations for work
assessment and pay standards of managers of central state-owned
enterprises which links their pay to the assessment results.
In 2004, the first year when the assessment and pay system was performed,
25 large state-owned firms got A, the best level, while13 enterprises got
D or E for failing to reach the goal.
Executives of enterprises getting an A level, will get an annual salary
of two or three times more than ever, said Xiong Zhijun, director of
Enterprise Distribution Bureau of SASAC.
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